The Reserve Bank of Australia (RBA) will meet on Monday, August 11, 2025, and Tuesday, August 12, 2025. The decision on the cash rate is expected at 2:30 PM local time on Tuesday. After last month’s unexpected choice to keep the cash rate steady, most expect a cut this time.

Expected Rate Cuts

Westpac predicts several rate cuts, aiming for a terminal rate of 2.85% by June 2026. They believe that if inflation and employment goals are met, strict monetary policies are not needed. The Commonwealth Bank of Australia expects a simple 25 basis point cut to 3.60%, as current data and labor reports align with RBA’s expectations. Although a rate cut seems likely, Governor Bullock’s comments in her follow-up press conference are expected to be firm. This is meant to lessen expectations for further rate cuts. With a 25 basis point cut almost certain tomorrow, the markets have likely already accounted for this move. As a result, the initial announcement may not significantly impact the Australian dollar or short-term bond yields. Traders will focus more on future signals. Recent economic data supports this move, boosting market confidence. The latest quarterly CPI data from late July 2025 shows headline inflation dropping to 2.9%, finally within the RBA’s target range. Additionally, an unemployment rate increase to 4.3% gives the bank solid reasons to start easing policy.

Governor Bullock’s Press Conference

After the surprising hold decision in July 2025, using out-of-the-money options could be a smart hedge. If the RBA decides to keep rates steady again, it could cause a sharp rise in the Australian dollar. These low-cost options may offer significant benefits if the consensus is wrong for the second month in a row. The highlight will be Governor Bullock’s press conference after the rate decision. We expect a “hawkish cut,” where she announces the anticipated easing but uses strong language to discourage the idea of a quick series of cuts. If her tone is softer than expected, it could signal traders to sell the Australian dollar and buy bond futures. Looking ahead, the plan is to trade based on the future interest rate path. With Westpac forecasting a terminal rate of 2.85% by mid-2026, we are likely in for a long easing cycle. We can utilize interest rate swaps and futures contracts for late 2025 and 2026 to prepare for a cutting cycle that might proceed faster or slower than current market expectations. Reflecting on the beginning of the 2019 easing cycle, the first cut led to ongoing currency weakness as the bank continued to ease. However, initial reactions can be volatile if forward guidance is not clearly dovish. We need to be prepared for this possibility, expecting that the RBA will carefully manage expectations. Create your live VT Markets account and start trading now.

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